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New Overtime Rules Could Cause Big Change for Events Industry

Regina McGee
, Editor-at-Large
April 20, 2016
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Oceanside, CA - As many as five million more employees may qualify for overtime this year under a proposed update to the Fair Labor Standards Act by the Department of Labor (DOL). The new rules would greatly expand eligibility for overtime by raising the salary threshold for overtime exemption from $23,500 per year to $50,440. And for the first time, the salary threshold would be automatically adjusted annually, either by tying it to inflation indexes or by basing it on median wage levels.

The new rules were under review this Spring by the White House’s Office of Management and Budget, which is widely expected to release final rules to the DOL in mid-May, with employers the having 60 days after that to come into compliance, according to HR Morning, an online news service for human resource professionals. 

How might the proposed changes affect the event industry, where many full-time salaried professionals are often called upon to travel and work more than 40 hours a week? 

David Dubois, president and CEO of the International Association of Exhibitions and Events, noted that many of the details of the proposed changes are still being worked out. ”We are continuing to study possible ramifications,” he said. “We are not able to comment until further clarifications are communicated publicly, and we have had an opportunity to estimate the potential impact on the exhibitions and events industry.”

Tom Corcoran, president of Corcoran Expositions, Inc., offered this perspective: “I read that the change would cost businesses at least $250 million per year, and yes, trade shows would be impacted. Our business model is built on long-term employees producing shows for long-term clients, with an average 10-year relationship. We will work within the new law to make sure that all our valued employees continue to be happy at Corcoran Expositions.”

Ty Bobit is president and CEO of Bobit Business Media, which employs 173 employees and is headquartered in Torrance, CA. “Being based in California, which is probably the toughest state in which to do business, we have always been very aware of exempt versus non-exempt status of our associates, and have been paying overtime to non-exempt employees all along, including some event personnel,” he said. “So for us, we don’t see the new rules making a lot of difference.”

He added that for the industry as a whole, “Many companies might have to learn how to deal with overtime pay as well as properly classifying workers as either exempt or non-exempt. We also may have to learn how to work more with local employment agencies.”

Proponents of the change say the salary threshold, designed to exempt highly paid white-collar workers, hasn’t seen meaningful change in decades. In 1975, for example, more than 60% of salaried workers were eligible for overtime, but today less 8% of full-time salaried workers are covered by those regulations, according to the White House Domestic Policy Council.

Since the proposed changes were announced last year, business groups have largely denounced them, saying they would lead employers to reclassify salaried workers as hourly employees, thereby stripping those workers of benefits and flexibility in the workplace. Trade groups for the hospitality, restaurant, and retail, and construction industries have been especially vociferous in opposing the changes.

 

The American Society of Association Executives (ASAE) has voiced its objections as well. “We are, first of all, not opposed employee’s right to fair pay. But these rules will hit employers in lower-wage and lower-cost-of-living areas especially hard,” said Chris Vest, director of public policy for ASAE. “This is why we don’t subscribe to the ‘one-size-fits-all’ approach to expanding overtime eligibility, and we have instead suggested that overtime pay should be keyed to government data on regional cost-of-living differences.”

 

The Society for Human Resource Management (SHRM) says the new rules go too far. “We agree that the salary threshold to qualify for exemption needs to be updated — it’s more than 10 years out of date,” said Nancy Hammer, SHRM’s senior government affairs policy counsel. “But we object to the DOL’s proposal to increase of 113% over the current threshold. That’s too dramatic of an increase.”

Further, SHRM also opposes the automatic annual adjustment of the salary threshold that the DOL is proposing. Instead, the association said, the DOL should raise the threshold in line with previous adjustments and continue to periodically make adjustments rather than use an automatic adjustment mechanism.

“All employers will need to look at which of their employees who are currently classified as exempt make less than $50,440 per year. This could include meeting planners and others working in the convention and event planning industry,” Hammer said. “Employers can respond by giving employees near the threshold a raise in order to maintain their exempt status. But if they will be getting annual raises based on the new threshold each year, this could quickly cause wage compression — where the salary of the person getting automatic annual increases starts to butt up against their supervisor’s salary.”

As an alternative, employers could reclassify these employees to non-exempt, hourly employees and track hours worked to ensure that reclassified employees are compensated time and a half for any hours worked over 40 a week, she said. “This may be difficult in industries, like event planning, where professionals often work irregular hours that may span weekends and involve travel.” 

Reach David Dubois at (972) 458-8002 or ddubois@iaee.com; Tom Corcoran at (312) 541-0567 or tcorks@corcexpo.com; Ty Bobit at (310) 533-2400 or ty.bobit@bobit.com; Chris Vest at (202) 626-2723 or cvest@asaecenter.org; and Nancy Hammer at (703) 548-3440 or nancy.hammer@shrm.com

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